Trust Estate of Schaefer, Matter of

• Decision Date: 20 July 1979
• Docket Number: No. 78-451,78-451
• Citation: 283 N.W.2d 410,91 Wis.2d 360
• Parties: In the Matter of the TRUST ESTATE of Ben G. SCHAEFER, Deceased. FIRST NATIONAL BANK OF KENOSHA, Trustee, Appellant, Marilynn H. Schaefer, Co-Appellant, v. Arthur E. SCHAEFER, Respondent.
• Court: Wisconsin Court of Appeals

Page 410

283 N.W.2d 410

91 Wis.2d 360

In the Matter of the TRUST ESTATE of Ben G. SCHAEFER, Deceased.

FIRST NATIONAL BANK OF KENOSHA, Trustee, Appellant, Marilynn H. Schaefer, Co-Appellant, v. Arthur E. SCHAEFER, Respondent.

No. 78-451.

Court of Appeals of Wisconsin.

Submitted on Briefs, April 18, 1979.

Opinion Released July 20, 1979.

Opinion Filed July 20, 1979.

F. William Haberman, Michael, Best & Friedrich, Milwaukee, for appellant.

Marilynn H. Schaefer, pro se.

Brown, Black, Riegelman & Kreul, Racine, for respondent.

Before BROWN, P. J., BODE, J., and ROBERT W. HANSEN, Reserve Judge.

BROWN, Presiding Judge.

This appeal involves a joint petition brought by Arthur E. Schaefer, co-executor of Ben G. Schaefer's estate, and the First National Bank of Kenosha, trustee of the testamentary trust, for a declaration of rights.

Ben Schaefer died testate on October 22, 1969. His will was admitted to probate on December 9, 1969. Under the will his brothers, Arthur E. Schaefer and David E. Schaefer, and his sister, Sadie Stein, were named co-executors and co-trustees.

Among the assets of the estate at the time of Ben Schaefer's death were thirteen parcels of real estate held in the names of Ben G. Schaefer and Arthur E. Schaefer. During the administration of the estate, a challenge was made by Mrs. Marilynn Schaefer, Ben Schaefer's widow, to the claim that these parcels of real estate were owned by Ben and Arthur Schaefer as a partnership. The Wisconsin Supreme Court held that the real estate in question was partnership property. In re Estate of Schaefer, 72 Wis.2d 600, 241 N.W.2d 607 (1976).

Shortly after the supreme court's decision, by order of the Kenosha county probate court, the First National Bank of Kenosha was appointed trustee of the testamentary trust pursuant to Ben Schaefer's will. All of the remaining estate assets, including Ben Schaefer's partnership interest in the Ben G. Schaefer and Arthur E. Schaefer Real Estate Department (hereinafter referred to as the Schaefer Partnership), were assigned to the trustee.

After the partnership interest was assigned to the trustee, an accounting of the partnership assets, profits and losses was filed with the probate court. No objection was made to the accounting by the trustee. ¹ The trustee did, however, dispute the manner in which the present value of Ben Schaefer's partnership interest is to be computed. Consequently, the trustee and Arthur Schaefer brought this action for a declaration of rights. In their petition, Arthur Schaefer contended that Ben Schaefer's interest (now the interest to be transferred to the trust) in the partnership was governed by sec. 178.37, Stats. ² Thus, he claimed that the estate's interest is 50% Of the date of death valuation plus 50% Of the profits from the date of death to final settlement. The trust claimed that the deceased's partnership interest is 50% Of the valuation of the partnership assets at the time of liquidation or final settlement which has not yet occurred. The partnership assets have substantially appreciated since Ben Schaefer's death. The major issue involved in this case is whether the trust is now entitled to 50% Of the appreciated value of the real estate.

A hearing on the matter was held on April 13, 1978 in the probate court for Kenosha county. After the hearing and after both parties had submitted briefs on the issues, the trial court issued a written decision holding that the rights of the trustee are controlled by sec. 178.37, Stats. Therefore, the trustee's interest in the Schaefer Partnership is limited to 50% Of the partnership assets at the date of death valuation plus interest or profits accruing since death to the date of final settlement. On August 23, 1978, the trial court issued its decree declaring the rights of the trust pursuant to its decision. The trustee is appealing from this decree.

Before we reach the main issues in this appeal, two initial issues raised by the co-appellant, Marilynn Schaefer, must be addressed.

                At the outset of these proceedings, Marilynn Schaefer objected to the proceedings on the ground that the probate court lacked subject matter jurisdiction to proceed.  Her argument was that since she had filed an independent action for accounting of the partnership assets, the dismissal of which was on appeal, the appeal stayed any lower court action on the subject matter of the appeal.  3  Since her appeal related to an accounting of the partnership assets, she argued that the probate court lacked subject matter jurisdiction.  Jurisdiction over the subject matter was in the appellate courts
                

We think Mrs. Schaefer's claim has no merit. In the present case, the trustee has not objected to the accounting of the partnership assets filed with the probate court. The sole concern in this case is whether the trustee is entitled to a portion of the appreciated value of the assets since the death of Ben Schaefer. A determination of this suit has no effect on Mrs. Schaefer's suit for an accounting. Mrs. Schaefer sought an accounting of the value of the assets owned at the time of death. Her suit did not involve a dispute over the current market value of the assets nor the rights of the trustee to any appreciated value. Where an appeal is pending, matters not directly concerned with the appeal but related to the case are still properly within the trial court's jurisdiction. See Hunter v. Hunter, 44 Wis.2d 618, 621, 172 N.W.2d 167, 169 (1969). If Mrs. Schaefer succeeds in her suit for accounting, any additional funds due the trust could be transferred to the trust regardless of the result in the present case. Therefore, the trial court had subject matter jurisdiction to proceed. Mrs. Schaefer makes no claim, nor could she, that the probate court lacks subject matter jurisdiction for any reason other than that an appeal was pending in her accounting suit.

The second issue that must be addressed is whether the disposition of the merits of this case is controlled by our decision in Schaefer v. Schaefer, supra note 1. In that case, the sole issue presented on appeal was whether Marilynn Schaefer had standing to sue for an accounting. We held that under secs. 178.37 and 178.38, Stats., a suit for accounting must be brought by the legal representative, not a beneficiary, unless the legal representative had an adverse interest, refused Or failed to act. Since Mrs. Schaefer had alleged that the surviving co-executors had either an adverse interest or had failed to act, she had standing to sue for an accounting. The holding in that case neither addressed nor resolved any issues relating to the rights of any of the parties to appreciation, profits or right to liquidate. Section 178.37, Stats., was merely referred to in determining who had standing to sue for an accounting and the possible interest Marilynn Schaefer may have as a lifetime beneficiary.

As to her interest (sufficient to confer standing), we held that since the partnership had not as yet been wound up, at the very least the trust would be entitled to interest or profits which have accrued since the death of Ben Schaefer. That interest, if any, would be transferred to the trust of which Marilynn Schaefer is the lifetime income beneficiary and would receive some benefit. Therefore, she had an interest sufficient to confer standing. That decision did not, however, hold that sec. 178.37, Stats., applied or controlled the estate's interest in the partnership assets. It, therefore, is not dispositive of any of the issues raised on this appeal.

Having disposed of the preliminary issues, we will now turn to the major issues raised on this appeal.

In the petition for a declaration of rights, at the hearing on the petition and on appeal, Arthur Schaefer claimed that, upon the death of a partner, sec. 178.37, Stats., applies in determining the value of the deceased partner's interest in the partnership. He claimed that under sec. 178.37, the trustee, as successor of the deceased partner's The trustee, on the other hand, claims that the trust is entitled to 50% Of the appreciated value. To support its claim to the appreciated value, the trustee first asserted that Arthur Schaefer, as surviving partner, and Arthur Schaefer, David Schaefer and Sadie Stein, as personal representatives of the estate, created a new partnership. The partnership consisted of Arthur Schaefer and the estate of Ben Schaefer. At the hearing, partnership tax returns were introduced listing the estate as a partner and showing income to the estate which was received from the partnership. The income was listed as partnership income. In addition, evidence was introduced showing that the estate shared equally in the expenses of the partnership as well as any profits made when assets were sold. Lastly, evidence was introduced showing that the partnership internal accounting procedures treated both the estate and Arthur Schaefer as equal partners. Both had draw accounts. The checking account was in the name of Ben Schaefer and Arthur Schaefer Real Estate Department. Rents were received and shared equally by Arthur Schaefer and the estate, and the estate was a party to all sales of partnership assets. Thus, the trustee's main claim was that Arthur Schaefer and the estate created a new partnership between themselves and continued to do business as a new partnership. As a result, the trustee, as successor to the estate's interest in the partnership, now has the right to permit the partnership to continue under the present arrangement where the estate and Arthur Schaefer share the expenses, losses and profits, or it may force dissolution and liquidation pursuant to secs. 178.26 and 178.32, Stats. Having the right to dissolve the partnership, the trust is entitled to an in cash distribution of 50% Of the value of the assets at the time of liquidation pursuant to sec. 178.33(1), Stats. ⁴

interest, was entitled to 50% Of the date of death value of the...